For some people, the word “budget” may invoke eye rolls, and for others a sense of dread. Still, others may love it- feeling a sense of wonder and control whenever a dollar goes into savings. I’m not really one of those last people, but I get it.

The method of budgeting I go over in this article takes a more mindful approach to the topic, which I know from personal experience makes sticking to your financial goals so much easier and worthwhile.

Side Note: If you did not see my previous post about setting up strong financial foundations through goal setting and identifying values, please check it out; the work we do here is so much more relevant once you’ve started with a strong foundation and have set value-based financial goals.

Understanding the Importance of Budgeting:

Budgeting serves as a cornerstone of financial stability and success.

By figuring out what you want your money to do for you and what it has historically done for you in the past, you gain a clear understanding of your financial standing and can make informed decisions to achieve your goals.

However, traditional budgeting approaches often focus solely on monetary transactions, neglecting the deeper psychological and emotional aspects of financial management.

Mindful budgeting, on the other hand, cultivates awareness, intentionality, and alignment with your values. By integrating mindfulness practices into the budgeting process, you can foster a holistic approach to financial well-being that encompasses both financial goals and personal fulfillment.

Step One: Acknowledge Your Spending

The first step on the path to mindful budgeting is to cultivate awareness of your spending habits. I know you’re going to cringe a little here, but I need you to stick with me.

Write It Down

For at least two weeks, commit to tracking what you spend your money on and how much you spent without making any changes to your spending behavior.

Do this in a note’s app of your choice on your phone after you eat dinner every day. If you commit to doing this daily it should take you no more than ten minutes to get it all written down, even if you went on a shopping spree that day.

Stop Judging Yourself

It is vital that while you track your spending you avoid judging yourself, as feeling bad or guilty is not the goal and you will be more likely to avoid tracking your spending to avoid those negative emotions.

To help stop judgment in its tracks, imagine that you’re writing down what a friend spent money on, or approach it with a purposefully neutral sense of curiosity. Ask yourself, “what did {inset my name here} do today” and write it as a journal entry instead.

For example: “Tawny went and bought coffee this morning on her way to work. It was $6.49. She was extra tired and wanted the burst of energy her normal tea just doesn’t give her. At lunch she bought a water bottle because she forgot hers at home, and she logged in to pay that credit card bill because the reminder popped up on her phone that it was due. The water was $3.50 and the bill due was $45.”

No judgment, just narration. Your goal is not to change anything, your goal is just to become aware. This exercise serves as a mirror, reflecting your financial habits and patterns back to you with clarity and honesty.

Step Two: Creating A Budget

Now that you have done the work of figuring out where your money has been going, you know what your financial goals are, and you are prepared to respect your values, it’s time to play the numbers game. If you haven’t done the financial goal setting and values exercises, please click here. These are important to have with you as you move into this next step.

List Expenses

There are a billion ways to set up a budget. I could tell you to use a spreadsheet or an app or I could tell you to take all your money out every pay day and only use cash, but I don’t think any of that is necessarily the point of tackling your finances mindfully, unless you think mindfully handling finances just means you don’t have the brain power left to think about anything else.

I am instead going to tell you to create a list of all of your monthly expenses. List everything from your rent or mortgage to your Netflix subscription cost out on a piece of paper. Go through your debit card transactions for the last thirty days and look for anything that is a monthly cost and write down what it is and how much it is.

Then, go through your two-week spending tracker that you kept on your phone (because you did that, right?) and total up all of your miscellaneous spending. Now double it, and that is your estimated monthly miscellaneous spending amount.

Note: If you know you aren’t going to do the first step and track your spending for two weeks, you can cheat and total up all your miscellaneous spending from the last two weeks from your debit card transactions, BUT you lose out on a lot of the mental benefits that come from actually tracking it yourself.

Categorize Expenses

Now that you have all of your bills and miscellaneous spending calculated, you are going to categorize each expense.

· Write an “N” next to each necessity, such as living costs, your car, gas, utilities, and groceries.

· Write an “F” next to anything that goes toward setting up your future you, such as paying off debt, student loans, savings, retirement accounts, or investments. Don’t write down what you want to put toward this category, just what you are putting toward this category.

· Finally, write an “E” next to anything that’s left, including your miscellaneous category you already calculated, all of your subscriptions, and anything else that may be considered “extra”. I am sorry to say that non-medically required massages and pedicures fall into the extras category.

Calculate how much of your income is going into each of these categories, and answer these questions:

· Am I spending more than I have coming in?

· Am I spending less than I have coming in?

· What does my ideal allotment look like?

· How can I better align this with my goals?

Adjust Expenses

Some people will tell you that your budget should have a certain percentage spent in each category, like 60% of your income should be spent on necessities and 20% toward your future, or any other nebulous number you could think of.

But if your goal is to never work again, you may need to find a way to put more income toward your future category. Meanwhile if your goal is to take bi-yearly trips to the Bahamas, you may be putting a lot more into your extras category for travel.

This is why knowing what your financial goals and values are is so important. Now is the time to move things around in order to align with the values and financial goals you set for yourself.

If you know you need to put a lot more into your extras and future categories, are there ways you can cut down your necessities?

For example, if your goal is to travel all over the world, do you really need a big house in an expensive state to live in?

Does your budget line up with what you decided you value? Does it support your goals? It’s time to dig deep and really switch things around.

Make your money work for you.

These are the types of choices your values and goals can help you make.

Note: I understand that some people may be sitting with nearly 100% of their income going toward necessities. That is the reality we live in with the rising cost of basically everything, but just know that if this is you, that is okay. And there are ways to help alleviate some of the burden.

Please feel free to message me for some advice on this topic separately, but keep in mind that I am not a financial planner; all my advice comes from personal experience, and what you choose to do with that information is up to you.

Step Three: Automation

As a general rule of life, you should automate as much as you can. The same is true for your financial life.

Bills

Automate anything that is a recurring charge, assuming you know you will be able to afford paying your bills on time. It takes some time to set up but you only have to set it up once and then you don’t have to worry about late payments ever again. Credit cards, utilities, rent- all kinds of expenses can be automated.

Bonus Tip: To help me keep track of what is coming out and when, I created a “money calendar” on my phone that I share with my partner and put the bill due as a monthly recurring all day event with the amount in the notes. Now we can see what’s coming out and when with a single glance at our weeks, so we know how much we need to have in our accounts at any given time.

Savings

Most companies will let you set up more than one direct deposit bank account. If yours is one of them, make sure to calculate how much of your checks should be going into your future savings category and setting that amount aside with your employer (typically HR handles this).

If your company only lets you use one direct deposit account, no worries- your bank should easily let you set up an automatic transfer every payday for the amount you want to send to a savings account (or two or three).

Retirement

How soon you want to retire is up to you and your financial goals, but chances are you need to be saving something toward this end goal.

If your company has a 401(k) option for you, fantastic! You should maximize any amount in here that gets you a matching percentage from your employer. If you don’t get a match or already got that handled, the next step is an IRA.

Depending on your income you may be eligible for a Roth IRA (most people are). This account can be set up similarly to direct deposit; you can get an account number and routing number and have a portion of your check sent over to it, or do what you did with your savings above and set up a recurring payday transfer.

I will dive a lot more into the different types of accounts in a later post, along with investments, so stay tuned for more details on all of these and what they can do for you.

Spending

You can keep your bill money and your spending money in the same checking account if you really want to and you feel like you can manage that, but I typically recommend keeping a separate checking account for both. That way your bills account always has enough and you know when your spending account is empty, you’ve hit your limit.

I go as far as to keep them in two separate online fee-free banks, but you can choose to do this how it makes sense for you. Use the automatic direct deposit or transfer steps above to set this up.

By automating financial processes, you remove the burden of manual intervention and reduce the risk of human error.

Congratulations on taking the next step on your journey towards mindful money mastery.

By integrating mindfulness practices into your budgeting process, you cultivate awareness, intentionality, and alignment with your values in your financial decisions.

In the next installment of this series (coming tomorrow, if not already posted) we’ll explore the art of mindful spending habits and strategies, including practical tips on overcoming bad spending habits and setting yourself up for success. After that, it’s on to tools and accounts.

0 comments

Why I Have More Than 6 Financial Accounts (And You Should Too)

Confessions of an Over-spender: The 5 Techniques I Used To Overcome Bad Spending Habits

The 3 Steps I Used to Set My Financial Goals and Values

See all posts from Tawny Anchondo